The World Gold Council (WGC) has reported a 127% increase in demand for gold in the first half of the year, compared to the same period in 2015, whilst appetite for the metal was 16% higher than during the financial crisis.
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Investment demand reached 448 tonnes as investors sought risk diversification and a safe store of value in the face of continued political, economic and social instability, it said.
Demand for gold rocketed in the first half of the year as investors sought sanctuary in the safe haven asset in the face of a “potent combination” of Brexit, the United States election and negative interest rates.
Gold-backed exchange traded funds (ETFs) and bars and coins performed strongly.
Investment, for the first time ever, was the largest component of overall gold demand for two consecutive quarters, the WGC said.
He estimates second half demand to rise to between 503 to 603 tonnes despite a 26 percent rally in local prices.
Indian demand was further impacted by rural incomes remaining under pressure, as well as the government’s decision to increase excise duty. “Higher prices, weak investment demand contributed in reducing consumption”, Sunil Kashyap, managing director, Global Banking and Markets at Scotiabank, told Reuters on Wednesday.
In India, local gold prices jumped to 32,455 rupees ($487.21) per 10 grams in July, the highest in almost three years, prompting consumers to sell their old jewellery. Meanwhile, China faced a challenging quarter against a relatively soft economic backdrop and the implementation of new hallmarking legislation in May.
The gold price surged 25% rise to an average of $1,259.6 (£968.14) an ounce in the second quarter.
Investors have been snapping up gold bars and coins in several markets, notably the USA where demand soared 101% between April and June, as gold eagle coins proved popular.
China and India, the world’s biggest gold consumers, saw jewellery purchases fall by 15% and 20% in the second quarter, to 144 tonnes and 98 tonnes respectively.
Chinese demand for gold totalled 981.5 tonnes a year ago, followed by India on 864.3 tonnes, according to data compiled by the World Gold Council.
Central banks are still expected to be key contributors to global demand, as gold provides diversification from currency reserves and, most notably, the dollar, it added. The primary driver of this increase was recycling, which saw a significant rise of 23%, as consumers capitalised on the rising gold price, leading to first half recycled gold supply of 687t, 10% higher than the 626t seen in H1 2015.
Global investment demand was 448t, up 141% from 186t in the same period a year ago.
Global jewellery demand fell 14% to 444t versus 514t in the second quarter of 2015. Mine production was flat at 787 tonnes during the same period.
In value terms, gold investment demand was Rs 8,980 crore, a drop of 2.1 per cent from Rs 9,170 crore in Q2 2015.
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The Royal Mint posted a sharp rise in profits, which it attributed partly to last year’s launch of Signature Gold, an online site allowing investors to buy or sell part of the 400oz gold bars held in its vaults.
